People are getting interested in crypto in this challenging time, where the concept of money may soon be challenged. While some are enticed by the technology, others are in for a potential windfall gain.
As reported by numerous mainstream media outlets in recent times, governments and corporations such as Facebook, Alibaba and Amazon are gaining favorable interest towards adopting blockchain technology for their existing applications. The influence of mass media about the novel technology has brought about great interest from speculative investors and everyday people who are exploring financial options which could transform their lives for the better. Cryptocurrencies, a form of reward generated with every transaction occurring on the blockchain, have garnered the attention of many people who have heard or came across information from someone about the market potential and worth by investing in them. Bitcoin (BTC) - the leading cryptocurrency in the market, are likely to be luring a new wave of mainstream audiences with an upcoming Bitcoin halving on 14th May 2020. This group of budding crypto investors are hoping to get into the market prior to the halving event.
Whatever the reasons may be, a growing retail interest in the Bitcoin halving can be seen on Google Trends, as reported by Coindesk. However, before an individual decides to venture into the newfound terrain of cryptocurrency trading, it is important for him or her to understand the dynamics of the market, and factors that may affect the value of each cryptocurrency. In order to become a seasoned and crypto trader, essential educational resources and trading knowledge about the cryptocurrency market is important. In addition to that, they will have to explore methods such as cryptocurrency mixing (or Bitcoin Mixing) and other privacy tools to protect their identity from bad actors, since transaction records made on the blockchain are transparent for everyone to see. For instance, Person A could be sending Person B his wallet address to receive some BTC. By doing so, Person A will inevitably be granting full access for Person B to view his entire wallet’s transaction history, since a quick 1-minute check on the blockchain explorer is enough.
While there are other necessary skills and tricks to acquire on the path as a fully fledged cryptocurrency trader, it is mandatory for every trader to at least grab the basics of cryptocurrency trading to minimise the risk of trading ‘blindy’. Thus, in the following paragraphs, we will be sharing some of the basic trading terms for crypto charts reading, which are required of a proper crypto trader to make a more accurate judgment in every trading call.
The Right Crypto Exchange
There are various parameters to look out for when choosing the right exchange to kickstart your journey as a crypto trader. These include, but not limited to, Ease of usage and UI, Security of funds, Past performance, Development team and Geographical Operations Map. For starters, we will recommend exchanges such as Binance, BitFinex, BitMex, CEX.io and Coinbase. Depending on your country’s jurisdiction, certain exchanges may not be available, or may offer limited features. Nevertheless, they are shortlisted for their simplicity and ease of use for beginners. Privacy-oriented individuals are also advised to make full use of tools like Crypto Mixers for an untraceable and fully anonymous process trading in Bitcoins.
Once you have selected your favorite exchange, it is time to learn some basics on chart readings found within the exchange.
Time Frames of Trading
In general, traders can choose between multiple time frames, from minutes to a month. While it does not seem important for ‘HODLers’, day traders will find the time segmented chart especially useful to strategise on their trade. For instance, shorter time frames like hourly charts are usually used by intraday traders. Such charts could provide an insight on the daily crypto price movements. Longer time frames could mean daily, weekly or monthly charts, and they are mainly used by longer-term investors to see a bigger picture and to examine certain crypto performance.
In the 1700s, a Japanese man named Homma Munehisa discovered a link between price and the supply and demand of rice, and that markets were strongly influenced by the emotions of traders. And over the next century, the candlestick chart (or sometimes referred to as Japanese candlestick chart) was invented based on his knowledge by Steve Nison.
These features are probably the first thing that you see when you enter the trading section of the exchange. Unlike bar charts, a candlestick chart appears in a best mixer of red or green candlesticks-like bars to give us a visual representation of the crypto price movement at specific time intervals. Apart from that, there are four main components within each candlestick, to depict other traders sentiment at that certain time frame. Traders could see the Open, Close, High, Low, Body and Shadows for each time frame.
Bearish and Bullish Reversal Patterns
Looking at a series of candlesticks within the chart could help traders understand if the particular price of the crypto is having an upward or downward trend. A green candlestick indicates a bullish movement (uptrend) and a red candlestick as bearish movement (downtrend). For example, a red candlestick occurs as a bearish move when the closing price is below the opening price. Likewise, a green candlestick is deemed a bullish move when the closing price is above the opening price. Analysing these movements within the candlestick chart could allow traders to buy or sell at the right opportunity at a specific time frame. However, there are more to just colors when it comes to analysing these candlesticks. For every bullish or bearish movement, there are also reversal patterns that are important for traders to make a more accurate decision during the trading process. There are three reversal patterns for each price movements, bullish or bearish:
Shooting Star - This pattern resembles a shooting star movement with a short lower shadow (buyers in control) and long upper shadow (sellers in control).
Bearish Engulfing - It is a pattern with a two-candlestick figure. The first candle implies a bullish movement, while the second bearish. This pattern happens when buyers were initially in control (uptrend), and sellers took over (downtrend) later in the specific time frame, resulting in a closing price lower than the former candle’s low.
Evening Star - This is marked as a three-figure pattern, where the first candlestick shows a bullish movement with a high closing price, a not-so-obvious range for the second candlestick, and finally a third candlestick that shows a bearish movement, with a lower closing price.
Hammer - It is viewed to be similar to a ‘hammer-shaped’ like pattern with a very short upper shadow and a longer lower shadow, signifying the entrance of buyers. This pattern forms when the price dipped right after the market opened. But the short-lived price dip will be succeeded by a strong momentum, resulting in a closing price higher than its opening price.
Bullish Engulfing - The two-candlestick figure pattern shows both bullish and bearish movements within the same time frame. The first candlestick is bearish while the second candlestick is bullish. It appeared like a ‘tug-of-war’ between buyers and sellers in the market, with the second candlestick indicating buyers have won at the end of the timeframe.
Morning Star - Finally, we are introduced to a three-candlestick pattern called the ‘morning star’. It is the opposite of Evening Star (Bearish Reversal), where the first bearish candle is followed by a second candlestick with minimal price movement (range), and ends with the third candlestick indicating buyers have the control at the specific timeframe. This makes the closing price higher than the opening price.
Mastering the Trade
While some may argue that mastering cryptocurrency trade themselves is considerably difficult, just like trading in the traditional stock markets, others believe that largely unregulated cryptocurrency market is unique in a way where price movements can be affected by the project development, news, social media and even pump and dumps. It gives the new generation of traders an opportunity to learn and master trading while everything is still pretty much in an uncharted territory in the decentralised space.
Contrary to popular belief, it is possible for individuals to pick up the right knowledge on cryptocurrency trading, and thereby devise the ultimate crypto trading strategy with the winning formula. Other essentials that a good crypto trader should learn would be to acquire the right skillset and tool to not only protect your assets, but also to secure and anonymise your trading earnings from unwanted individuals or entities. Traders can learn how to use a bitcoin mixer like MyCryptoMixer (MCM) in order to attain complete anonymity and make your wallet’s transaction untraceable, since it is a common practice for traders to move their funds out of the exchange wallet for security purposes.